Cotton futures edge down, register large Q3 loss

Cotton futures eased on Tuesday, seeing a huge loss in the third-quarter after recent statements from Beijing have confirmed traders' worries that a policy overhaul will hurt import demand in the world's largest textile market. The most-active December cotton contract on ICE Futures US closed down 0.1 cent, or 0.2 percent, at 61.37 cents a lb, holding above last week's five-year low of 60.83 cents.
-- China import demand fears keep prices near 5-year lows
Second-month prices finished the third quarter down 16.4 percent, on the heels of a second-quarter loss of 21.6 percent. That marks the contract's two-quarter rout since 2011. The December contract, which serves as the early benchmark for the 2014/15 crop year that begins on August 1, has toppled 30 percent from May highs around 85 cents a lb. Cotton was dragged by a broad-based sell-off, as strong greenback hit commodities markets. The US dollar index touched a four-year high against a basket of major currencies, making greenback-traded commodities more expensive to holders of other currencies. The benchmark contract couldn't sustain the day's gains of over 1 percent, seen as a technical failure that left prices lower on the close.
"There's a lot of push and pull here at the end of the month. There was a lot of outside pressure, from oil and grains markets," said Sharon Johnson, a cotton specialist with KCG Futures in Georgia. A national holiday in China was expected to keep trading volumes light over the upcoming week. Beijing last week said it would restrict imports in 2015 to the minimum required through World Trade Organisation commitments, providing long-awaited and much-feared details about the impact of China's cotton policy overhaul on demand for foreign fiber. The move will drive mills to domestic production, stoking worries over the potential for inventories in the rest of the world to swell. Even so, spot prices remained at a premium, due to tight nearby supplies in the United States, the world's top exporter.
The premium of the December contract above the March contract jumped to 0.85 cent a lb from 0.40 cent a lb previously. Exchange inventories have steadied at the lowest levels in a year. They were unchanged at 18,545 bales on Monday, the most recent ICE data showed.